SOUTHFIELD, Mich.--(BUSINESS WIRE)--Customer loyalty to automotive brands reached a 10-year high during the first quarter of 2015, according to analysis from IHS Automotive, a global provider of critical information and insight to the automotive industry and part of IHS Inc. (NYSE: IHS).
Brand loyalty during first quarter 2015 was 52.8 percent, the analysis found. Several brands also experienced 10-year highs in loyalty rates, including Chevrolet, GMC, Infiniti, Jeep, Land Rover, Lexus, Lincoln, Mazda, Mitsubishi, Nissan, Porsche, Subaru and Volvo.
Key drivers of these record results include a number of factors, said Tom Libby, manager of automotive loyalty and industry analysis at IHS Automotive.
“The increased number of different models within brands makes it easier for households that may need a different type of vehicle to maintain their loyalty,” Libby said. “In addition, the increased popularity of leasing since the downturn has helped significantly as lessees are consistently more brand loyal compared to retail owners.”
The number of models available in the U.S. market increased by 33 (12 percent) from 2005 to 2015, driven by major increases at several luxury brands. Customers returning to market now have a greater number of choices at the brand from which they purchased their original vehicle, increasing the probability they will remain brand loyal.
Industrywide, vehicle leasing has not been higher this decade either, and has rebounded from its decade low of 13.9 percent of the market in 2005 to 22.5 percent of the market so far in 2015, a nearly 62 percent increase. Based on new vehicle registrations analyzed by IHS Automotive, 24 of 32 segments reviewed had an increase in lease penetration over the decade.
In several vehicle segments, there have been increases in leasing penetration of more than 20 percentage points. This leasing trend is due, in part, to greater cooperation between OEM captive finance arms and their operating divisions.
Other contributors to higher loyalty rates include improved new vehicle quality, which is keeping consumers happy with their vehicle choice over time, implying higher loyalty and lower defection rates. Marketers also are aware that it is more cost effective to retain a customer than to conquest one, and therefore OEMs are placing a greater focus on loyalty and customer satisfaction over time.
Disloyal, by default
Consumers who returned to market for a new vehicle after driving brands that have been discontinued – such as Pontiac, Hummer, Mercury or Saturn, to name a few -- also account for some of the uptick in loyalty. Based on IHS analysis, the number of households returning to the market who had a discontinued brand in the garage has declined by 49 percent from 2010 to 2014, from 240,208 to 123,388. This dwindling group of households was forced to be disloyal and defect to another brand, since the brand of their garaged vehicle was no longer on the market.
OEMs are seeing the benefits from their efforts in vehicle content, expanded product lines and financing offerings to retain their customers as the market has stabilized from the great recession. Retention is critical for manufacturers to increase their market share. While OEMs are experiencing increased retention, it's critical that they also continue their conquesting activities in order to compensate for the normal churn in their customer base. In 2014, most brands lost more customers than they kept.
In addition, conquesting owners of competitive products will only get more difficult as the share of defectors declines. Product, marketing and financing actions will take on additional importance as brands attempt to conquest competitive owners. More specifically, among other things, understanding ownership life cycles, including the ability to predict which customers will return to market - and when - will be key competitive advantages moving forward.
About IHS Automotive loyalty methodology
Loyalty is determined when a household that owns a new vehicle returns to market and purchases or leases another new vehicle of the same make, model or manufacturer. IHS Automotive analyzes loyalty throughout the year and regularly works with its customers to effectively manage owner loyalty and conquest efforts through in-depth research and analysis of automotive shopping behaviors, related market influencers and conquest and retention strategies.
About IHS Automotive (www.ihs.com/automotive)
IHS Automotive, part of IHS Inc. (NYSE: IHS), offers clients the most comprehensive content and deepest expertise and insight on the automotive industry available anywhere in the world today. With the 2013 addition of Polk, IHS Automotive now provides expertise and predictive insight across the entire automotive value chain from product inception—across design and production—to the sales and marketing efforts used to maximize potential in the marketplace. No other source provides a more complete picture of the global automotive industry. IHS is the leading source of information, insight and analytics in critical areas that shape today’s business landscape. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs about 8,800 people in 32 countries around the world.
IHS is a registered trademark of IHS Inc. All other company and product names may be trademarks of their respective owners. © 2015 IHS Inc. All rights reserved.